UP 2010 Civil Law (Sales) PDF

CIVIL LAW REVIEWER
TABLE of CONTENTS
SALES
Table of Contents
Chapter I. The Contract of Sale ..................269
I.
Definition (Art 1458, CC) ...................269
II.
Elements ...........................................269
III. Stages ...............................................274
IV. Kinds of Sale .....................................275
V. Form ..................................................276
VI. Sale
Distinguished
From
Other
Contracts....................................................276
Chapter II. Obligations of the Seller and
Buyer .............................................................278
I.
Obligations of the Seller ....................278
II.
Obligations of the Buyer....................284
Chapter IV. Risk of Loss..............................288

I.
General Rule .....................................288
II.
Exceptions.........................................288
Chapter V. Documents of Title....................289
I.
In General .........................................289
II.
Negotiable Documents of Title..........289
III. Non-Negotiable Documents of Title ..289
Chapter VI. Remedies of the Seller and Buyer
.......................................................................291
I.
General Remedies (Art. 1191, CC) ...291
II.
Remedies of the Seller......................291
III. Remedies of the Buyer......................295
Chapter VII. Extinguishment of Sale ..........298
I.
In General .........................................298
II.
Conventional Redemption.................298
III. Equitable Mortgage ...........................299
IV. Legal Redemption .............................300
Chapter VIII. Philippine Bulk Sales Law (Act
3952) ..............................................................303
I.
Purpose .............................................303
II.
Coverage...........................................303
III. Duty of Seller.....................................303
IV. Effect of non-compliance...................304
268
SALES
Chapter III. Double Sales .............................286

I.
General Rule .....................................286
II.
Requisites .........................................286
III. Rules Governing Sale of Movables,
Immovables and Unregistered Lands ........286
Prof. Roberto N. Dio

Faculty Editor
Jaim Mari M. Crisostomo

Lead Writer
Jessa Mary Ann C. Cedeo
Eva Marie Guttierez
Kristoffer Gabriel L. Madrid
Ros Jean Nonato
Writers
CIVIL LAW
Kristine Bongcaron
Patricia Tobias
Subject Editors
ACADEMICS COMMITTEE
Kristine Bongcaron
Michelle Dy
Patrich Leccio
Editors-in-Chief
PRINTING & DISTRIBUTION

Kae Guerrero
Chapter I. The Contract of Sale

I.
II.
DEFINITION
ELEMENTS
A. CONSENT
B. SUBJECT MATTER
C. PRICE
III. STAGES
A. PREPARATION/NEGOTIATION
B. PERFECTION
C. CONSUMMATION
IV. KINDS
A. ABSOLUTE
B. CONDITIONAL
V. FORM
VI. SALE DISTINGUISHED FROM OTHER
CONTRACTS
A. DONATION
B. BARTER
C. CONTRACT FOR A PIECE OF WORK
D. LEASE OF THINGS
E. AGENCY TO BUY AND SELL
F. DACION EN PAGO
G. CONTRACT TO SELL
H. BILATERAL PROMISE TO BUY AND SELL
DESIGN & LAYOUT

Pat Hernandez
Viktor Fontanilla
Rusell Aragones
Romualdo Menzon Jr.
Rania Joya
I.
Definition (Art 1458, CC)
Contract where one of the parties (Seller)

obligates himself to:
LECTURES COMMITTEE
Transfer ownership of and
Michelle Arias
Camille Maranan
Angela Sandalo
to deliver a determinate thing;
Heads
Katz Manzano Mary Rose Beley
Sam Nuez Krizel Malabanan
Arianne Cerezo Marcrese Banaag
Volunteers
MOCK BAR COMMITTEE

Lilibeth Perez
BAR CANDIDATES WELFARE

Dahlia Salamat
LOGISTICS
Charisse Mendoza
SECRETARIAT COMMITTEE
Jill Hernandez
Head
Loraine Mendoza Faye Celso
Mary Mendoza Joie Bajo
Members
and the other (Buyer) to pay a price certain in

money or its equivalent.
II. Elements
The case of (Coronel v CA, 1996) enumerates
the 3 elements of a valid contract of sale
namely:
Consent
Subject matter
Price
_______
A. CONSENT
Meeting of minds upon the thing which is the
object of the contract and the price. (Art 1475,
CC)
Requisites
1. Capacity
2. Offer and acceptance
3. No vitiation
269
SALES
SALES TEAM
Chapter I. The CONTRACT of SALE
SALES
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CAPACITY
Rationale: Guardianship is a trust of the

highest order, and the trustee can not be
allowed to have any inducement o
neglect his wards interest. (Phil Trust
Co v Roldan, 1956)
All persons who have capacity to enter into

obligations may enter into a contract of sale (Art
1489, CC)
c.
e. Lawyers
Property or rights in litigation in which
they take part because of their
profession
Rationale: Lawyer may have undue
influence over client. Greed may get the
better of the sentiments of loyalty and
disinterestedness.
(Valencia
v
Cabanting, 1991)
Prohibition is definite and permanent,
cannot be cured by ratification. (Rubias
v Batiller, 1973)
Exceptions: An assignment to a lawyer
by his client of an interest in the property
does not violate Art 1491, where
A judgment has been rendered and
has become final; and
In case of contingency fee
arrangements. The interest of the
lawyer maybe annotated as an
adverse claim on the property
awarded to his client (Director of
Lands v Ababa, 1979)
General Rule: Cannot sell property to

each other
Exceptions:
1. Separation of property in marriage
settlement, OR
2. Judicial separation of property.
or
Exception: if acquisition is through

hereditary succession
c.
their
d. Public Officers and Employees

Property
of
State/any
of
its
subdivisions/GOCC, the administration
of which was entrusted to them.
2. Relative Incapacity
a. Husband and Wife (Art 1490, CC)
(Asked in 75, 76, 00, 02, 06)
b. Alienage (Art. 39, CC)

Aliens disqualified to purchase
acquire property.
Executors and Administrators

Property
of
estate
under
administration
Trusteeship (Art. 39)
3. Specific Incapacity (Art. 1491, CC) (AGEPLJ)

a. Agents
Property whose administration or sale
was entrusted to them
Exception: principal gives consent.
b. Guardian
Cannot purchase property of person
under his guardianship
f.
Justices, Judges, prosecuting attorneys,

clerks
Property or rights in litigation or levied
upon on execution
Rationale: to prevent fraud and to
surround their profession with prestige
Prohibition applies only on sales or
assignment during the pendency of
litigation
involving
the
property.
(Macariola v Asuncion, 1963)
Effects of Incapacity
1. Absolute Incapacity
If both parties are incapacitated:
UNENFORCABLE (Art. 1403 (3))
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SALES
Kinds of Incapacity
1. Absolute Incapacity (MInD-CI) (Art. 1327,
CC)
a. Minors
b. Insane or Demented
c. Deaf-mutes who do not know how to
write
d. Civil Interdiction
e. Judicially-declared
Incompetents(Art.
39)
Prodigals
Imbeciles
Absence & presumption of death
Persons not of unsound mind but by
reason of age, disease, weak mind,
and other similar causes, cannot
take care of themselves and
manage their property without
outside aid (Easy prey for deceit
and exploitation)
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2. Relative Incapacity
Sale between spouses is VOID.
Rationale: (as provided in the case of
Medina v CIR, 1961)
rd
To protect 3 persons who may
have contracted with the spouse
To avoid undue advantage of the
dominant spouse over the weaker
spouse.
To avoid indirect prohibition against
donations between spouses.
Such prohibition shall likewise apply to
common law spouses. (CalimlimCanulas v Fortun, 1984) BUT if
already sold to a third person who relied
on the title of his immediate seller,
reconveyance to the seller spouse is no
longer available (Cruz v CA, 1997)
3. Specific Incapacity
Contracts expressly prohibited by law
are void and cannot be ratified. Neither
can the right to set-up the defense of
illegality be waived. (Art. 1409 (7), CC)
Sales entered into by guardians,
administrators, and agents (specific
incapacities) in violation of Art. 1491
may be ratified by means of and in the
form of a new contract when the cause
of nullity has ceased to exist. Ratification
is valid only from date of execution of
the new contract and does not retroact.
Those
entered
into
by
public
officer/employees, justices and judges,
and lawyers also in violation of Art. 1491
are inexistent and void from the
beginning. (Rubias v Batiller, 1973).
the provisions of law governing the form of

contracts. (Art. 1475, CC)
A private instrument signed by the
defendant reciting that he bought from the
plaintiff a property at a specific address for a
specific price to be paid as soon as a bill of
sale is signed is not a mere draft but a
perfected agreement and hence, obligatory,
even if there was no statement as to area or
price per meter. (Goyena v. Tambunting,
1902)
Form and Offer

Offer must be certain as to the object and
price (Art. 1319, CC)
Business advertisements of things for sale
are not offers but mere invitations to make
an offer
Exception: If otherwise provided (Art.
1325, CC)
Advertisements for bidders are simply
invitations to make proposals (Asked in 80)
Advertiser not bound to accept the
highest or lowest bid
Exception: Unless the contrary appears
(Art. 1326, CC)
Form of Acceptance
unconditional
Qualified acceptance = counter-offer (Art.
1319, CC)
May be express or implied (Art. 1320, CC)
Acceptance must be in accordance with the
terms and conditions of the offer. There is
no meeting of the minds if the offer lapsed
even though the offeree later on was willing
to accept the terms and conditions of the
offer. (Beaumont vs. Prieto, 1916)
MUST NOT BE VITIATED

A contract where consent is given through
mistake, violence, intimidation, undue
influence, or fraud is voidable. (Art. 1330,
1390 (2), CC)
There is fraud where through insidious
words or machinations of one of contracting
parties, the other is induced to enter into a
contract which, without them, he would not
have agreed to. (Art. 1338, CC)
OFFER AND ACCEPTANCE

_______
In General
The contract of sale is perfected at the
moment there is meeting of the minds upon
the thing which is the object of the contract
and upon the price.
From that moment, the parties may
reciprocally demand performance, subject to
B. SUBJECT MATTER
Requisites
1. Licit
2. Existing, future or contingent
3. Determinate or determinable
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SALES
If only 1 party is incapacitated:

VOIDABLE
-If necessaries are sold and delivered to
an incapacitated person: must pay a
reasonable price therefore. (Art 1489,
CC)
Necessaries those which are
indispensable for sustenance, dwelling,
clothing, medical attendance, education
and transportation. (Art 194, Family
Code)
MUST BE LICIT (ART. 1459)

The thing is licit when
1. Within the commerce of man (Art 1347, CC)
Example of properties that are not within the
commerce of man:
a. Those belonging to the State or its
political subdivisions intended for public
use or public service. (Art 420, CC).
b. Church
c. Narcotics or dangerous drugs except
upon prescription (RA 6425, the
dangerous drugs act of 1972)
2. Rights are also licit when not intransmissible
(Art 1347, CC)
Sale of future inheritance is void. (Art. 1347,
CC)
1. The rights to succession are transmitted
from the moment of the death of the
decedent (Art. 777, CC). Thus, one cannot
sell or promise to sell what he expects to
inherit from a living person. (Rivero v.
Serrano, 1950)
2. -Heir may sell his hereditary rights (which
have accrued).
When the subject matter is illicit, the contract of
sale is void (Art. 1409 (7))
EXISTING, FUTURE, CONTINGENT
The goods which form the subject of a
contract of sale may be either
1. existing goods owned or possessed by the
seller;
2. goods to be manufactured, raised, acquired
by the seller, also called future goods;
3. whose acquisition of the seller depends
upon a contingency which may or may not
happen. (Art 1462, CC)
4. Things having potential existence may be
the object of a contract of sale. (Art 1461,
CC)
Sale of MERE hope or
expectancy
Valid BUT subject to
condition that the thing
will come into existence
Example: Next catch of
a fisherman.
Emptio Rei Speratei
Valid
Parties
make
the
contract depend upon
the existence of a thing,
If the thing does not
Sale of VAIN hope or

expectancy
Void
Example: Sale of a
falsified
raffle
ticket
which will never win.
Emptio Spei
Void
Parties
intend
the
contract to exist at all
events
Buyer will have to pay
come into existence: the price even if the

contract is considered as thing does not actually
not made and there is no came into existence
obligation to pay the
price
In case of doubt the presumption is in favor of
emptio rei speratae since it is more in keeping with
the commutative character of the contract.
DETERMINATE OR DETERMINABLE
A thing is determinate when it is particularly
designated or physically segregated from all
others of the same class. (Art 1460, CC)
A thing is determinable when it is capable
of being made
determinate at the time
the contract was entered into without the
necessity of a new or further agreement
between the parties. (Art 1460, CC)
Failure to state the exact location of the land
does not make the subject matter
indeterminate, so long as it can be located.
(Camacho v C,A 2007)
The fact that the exact area of subject land
in the contract of sale is subject to the result
of a survey does not render the subject
matter indeterminate. (Heirs of Juan San
Andres v. Rodriguez (2000))
Particular Kinds
1. Future Goods
Sale of future goods or those goods which
are to be manufactured, raised, or acquired
by seller after the perfection of the sale is
valid (Art 1462, CC). Future goods are
those capable of future existence.
2. Sale of Undivided Interest or Share
a. Sole owner of a thing may sell an
undivided
interest
therein.
(Art
1463,CC) Ex., a fraction ( or half) or
percentage (50%), or my share in the
property.
b. The sale of an undivided share in a
specific mass of fungible goods makes
the buyer a co-owner of the entire mass
in proportion to the amount he bought.
(Art 1464,CC)
c. Co-owner cannot sell more than his
share (Yturralde v CA, 1972) (Asked
in 01, 02)
3. Sale of Things in Litigation
a. Sale of things under litigation entered
into by defendant, without the approval
of the litigants or the court is
rescissible. (Art 1381 (4))
b. NO RESCISSION where the thing is
rd
legally in the possession of 3 persons
who did not act in bad faith (Art 1385
(2))
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SALES
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5. Quantity of Subject Matter not determinate

The fact that the quantity is not determinate
shall not be an obstacle to the existence of
the contract provided it is possible to
determine the same, without the need of
new contract. (Art. 1349, CC)
2. But if thing or part thereof has been

delivered and appropriated by the buyer, he
must pay a reasonable price therefore.
a. What is reasonable price? A question
of fact dependent on circumstances.
(Art 1474, CC)
b. In the case of Philippine Free Press v
CA (2005), the court held that the price
was
reasonable based on factual
determination
predicated on offered
evidence (Companys
Balance
Sheet showed the book value or fair
market value of its shares)
_______
IN MONEY OR ITS EQUIVALENT
C. PRICE
Requisites (Ce-MoRe)
1. Certain or ascertainable at the time of
perfection
2. In Money or its equivalent
3. Real
CERTAIN OR ASCERTAINABLE AT THE TIME
OF PERFECTION
Price considered certain in the following
cases
1. Fixed by agreement of the parties
a. Fixing of price cannot be left to
discretion of one of the parties
b. BUT if such is accepted by the other,
sale is perfected. (Art 1473, CC)
2. Determination is left to the judgment of a
specified person
a. If unable or unwilling: Sale is
inefficacious
UNLESS
parties
subsequently agree about the price.
b. If in bad faith/by mistake: Courts may fix
price
rd
c. If 3 person is prevented from fixing
price by fault of seller or buyer: Innocent
party may avail of remedies.
3. It be so in reference to another thing, or
when the price fixed is that which the thing
have on a definite day, or in a particular
exchange or market, OR when the amount
fixed is above or below the price on such
day, exchange or market. (Art 1472, CC)
If price cannot be determined (Asked in 76)
1. Sale is inefficacious (Art. 1474, CC)
Example of equivalent: Letters of credit

If price is partly in money and partly in
another thing: Determine manifest intention
of the parties to see whether it was barter or
sale. (Art 1468,CC)
If intention does not clearly appear, it shall
be considered a barter if the value of the
thing exceed the amount of money or its
equivalent.(Art 1468,CC)
REAL
Meaning of Real
When buyer has an intention to pay and the
seller has an expectation to receive the price
1. If simulated: Sale is VOID; BUT act may be
shown to have been a donation or some
other act or contract. (Art 1471, CC)
2. In Labagala vs. Santiago (2001), Petitioner
admittedly did not pay any centavo for the
property. Hence, the sale is void.
If Price is false (real consideration is not the
same as that stated in the contract)
1. Sale is void
2. UNLESS proved to be founded on another
true and lawful price (Art 1353, CC)
_______
Gross Inadequacy of Price
1. General Rule: Does not affect a contract of
sale. (Art 1470,CC)
The stipulation in a contract of sale
which states that the consideration is
P1 and other valuable considerations
does not make the contract void. Gross
inadequacy of price does not affect the
contract of sale except that it may
indicate a defect in consent. (Bagnas v.
C.A., 1989)
273
SALES
4. Things Subject to Resolutory Condition

Sale of things subject to a resolutory
condition, i.e. things acquired under legal or
conventional right of redemption, or subject
to reserva troncal, may be the object of a
contract of sale. (Asked in 99) (Art 1465,
CC)
CIVIL LAW REVIEWER
2. Exceptions:
a. It may indicate a defect in consent such
as fraud, mistake, or undue influence
b. It may indicate that the contract was in
reality a donation or some other act or
contract
c. Inadequacy would make the contract of
sale rescissible where a contract was
entered into by the guardian of a ward or
a representative of an absentee, without
the courts approval, and the owner
suffers lesion by more than of the
value of the thing sold. (Art 1381 (1) (2),
CC)
agreed period, at a fixed price. (De

la Cavada vs. Diaz, 1918)
An option is not of itself a purchase,
but merely secures the privilege to
buy.
A consideration for an optional
contract is just as important as the
consideration for any other kind of
contract.
If
there
was
no
consideration for the option, then it
cannot be enforced any more that
any other contract where no
consideration exists. (Baviera)
b. Difference from Sale:

SALE
Bilateral
III. Stages
Sale of property
A. Negotiation/Preparation
From the time the parties indicate interest in the
contract up to the time said contract is perfected
1.
Offer
a. General Rule: Offer may be withdrawn
at any time without even communicating
such withdrawal to the interested buyer.
b. Exception: When the offerer has
allowed the offeree a certain period to
accept, the offer may be withdrawn at
any time before acceptance by
communicating such withdrawal. (Art
1324, CC)
c. Exception to the exception: Cannot be
withdrawn within the period if offer is
founded upon a consideration. (Art 1324
and 1479, CC)
2. Option Contract (Asked in 75, 77, 80, 93,

02)
a. Definition
An accepted unilateral promise to
buy or sell supported by a
consideration distinct from the price
(Art 1479, CC)
An optional contract is a privilege
existing in one person, for which he
had paid a consideration, which
gives him the right to buy, for
example, certain merchandise or
certain specified property, if he
chooses, at any time within the
c.
OPTION CONTRACT
Unilateral: gives a right to buy
or to sell, but imposes no
obligation on the part of the
option-holder, aside from the
consideration for the offer
Sale of right to purchase
Right of first refusal (Asked in 93, 96,

98, 02, 08)
As to enforceability
Equatorial Realty Development
vs. Mayfair, (1996): If the right to
the first offer is embodied in the
contract, it should be executed
according
to
the
terms
stipulated. The right should be
enforced according to the law
on contracts and not on the
panoramic and indefinite rule on
human relations. This juridical
relation is not amorphous nor is
it merely preparatory.
When the grantee fails to exercise
the right
Paranaque Kings vs. CA,
(1997): Only after the grantee
st
fails to exercise its right of 1
priority under the same terms
and conditions within the period
agreed upon, could the grantor
validly offer to sell the property
rd
to a 3 person under the same
terms as offered to the grantee.
As to the effects of the violation
of the right
Rosencor Devt. Corp. Vs.
Inquing (2001): A sale made in
violation of a right of first refusal
is valid but rescissible, and
may be the subject of an action
for specific performance.
However, before the sale to the
rd
3 person may be rescinded, he
274
SALES
Manner of Payment
Disagreement on the manner of payment is
tantamount to a failure to agree on the price.
(Toyota Shaw vs. CA, 1995)
CIVIL LAW REVIEWER
must have been actually or

constructively aware of the
st
right of 1 refusal at the time
he bought it.
The
sanction
for
the
enforcement of the right of first
refusal against third persons is
based on Art. 19 of NCC, as no
real right was created on the
property.
Difference from sale:

ST
SALE
RIGHT OF 1 REFUSAL
Bilateral
Unilateral
Price and other Price and other terms are yet to
terms of payment be agreed upon
are certain
the thing to be sold must be determinate
Option Money vs. Earnest Money (Limson vs.

Ca, 2001)
OPTION MONEY
Separate and distinct
consideration from the
purchase price
Given when sale is not
yet perfected
When given, the wouldbe-buyer is not required
to buy, but may even
forfeit it depending on
the terms of the option
Grantee of option is still
undecided whether or
not to buy or sell the
property (Baviera)
EARNEST MONEY
Part of purchase price
(Art 1482, CC)
Given only when there
is already a sale
When given, the buyer
is bound to pay the
balance
Buyer manifests his

earnest desire to buy
the property
_______
C. Consummation
Distinction from Option Contract
OPTION
CONTRACT
Separate
consideration
is
necessary
Grantee has the
right to buy or sell
RIGHT OF 1
ST
REFUSAL
No need for
consideration
separate
No right to buy or sell, only a

st
right to match the 1 offer to
buy should the grantor decide
to sell
_______
B. Perfection
(Asked in 88 and 91)
When Perfected
1. Contract of sale is a consensual contract,
hence perfected at the moment of the
meeting of the minds of the parties as to the
object of the contract and the price. (Art
1475,CC)
2. It is the proof of all the essential elements of
the contract of sale, and not the mere giving
of earnest money, which establishes the
existence of a perfected sale. (Platinum
Plans Phils. vs. Cucueco, 2006)
Effect of Perfection
From the moment of the perfection of the
contract of sale, the parties may reciprocally
demand performance, subject to the provisions
of the Statute of Frauds. (Art 1475,CC)
Earnest Money
Definition- paid in advance of the purchase
price agreed upon by the parties in a contract of
sale, given by the buyer to the seller, to bind the
latter to the bargain. (Asked in 93, 02)
Begins when the parties perform their respective

undertakings under the sale. It culminates in the
extinguishment of the sale. (See obligations of
seller and buyer, Chapter II)
IV. Kinds of Sale

(Asked in 97, 00)
A. Absolute Sale
Sale is not subject to any condition
whatsoever; title passes to the buyer upon
delivery of thing sold
B. Conditional Sale
Contract is subject to certain conditions
(usually the payment of the purchase price);
title will only pass once the conditions have
been fulfilled
In some cases, the Court makes finer
distinctions between a conditional sale and a
contract to sell:
a. Contract to sell- The fulfilment of the
suspensive condition, which is the full
payment of the price, will not
automatically transfer ownership to the
buyer although the property may have
been previously delivered to him.
b. Conditional Sale: The fulfilment of the
suspensive condition renders the sale
absolute and affects the sellers title
thereto such that if there was previous
delivery of the property, the sellers
ownership or title the property is
automatically transferred to the buyer.
(Ursal vs. CA, 2005)
275
SALES
CIVIL LAW REVIEWER
General rule: No form required as to validity

since sale is perfected by consent of the parties.
The sale may be (Art.1483,CC):
1. Written
2. Oral
3. Partly written and partly oral
4. Inferred from the conduct of the parties
Exceptions:
1. Statute of Frauds (Art,1403 (2),CC)
a. Contract or some memorandum thereof
must be in writing and subscribed by
the party or his agent, otherwise
contract is unenforceable. Unless
ratified by failure to object to oral
evidence or acceptance of benefits
under the contract
b. What are under the Statute of Frauds:
Sale of goods, chattels, or things in
action at a price not less than P500
Sale not to be performed within 1
year
Sale of real property or an interest
therein (Art 1358, CC)
c. Applies only to executory contracts, not
to contracts either totally or partially
performed. (Iigo v. Estate of Maloto,
1967)
2. Sale of realty by an agent
Agents authority must be in writing,
otherwise the sale is void (Art.1874, CC)
3. Sale of large cattle
To be valid, transfer of large cattle must be
registered with the municipal treasurer
(Sec.529, Revised Administrative Code)
Electronic Commerce Act (RA 8792)
1. Electronic documents have the legal effect,
validity or enforceability of any other
document or legal writing
2. As long as electronic document maintains its
integrity and reliability and is capable of
being displayed to the person to whom it is
to be presented, containing the electronic
signature of the person sending it. (Sec 7, 8
of RA 8792)
VI. Sale Distinguished

Contracts
From
Other
A. DONATION
SALE
Onerous
Perfected
consent
by
mere
DONATION
Gratuitous
Must comply with the
formalities required by
law. (Art 745, CC)
When the price of the contract of sale is

simulated, the sale may be void but the act may
be shown to have been in reality a donation or
some other contract. (Art.1471.CC)
B. BARTER
SALE
Consideration is price
in
money
or
its
equivalent
BARTER
Consideration
another thing
is
Barter is a contract where one of the parties

binds himself to give one thing in consideration
of the others promise to give another thing
(Art.1638, CC)
If consideration consists partly in money and
partly in another thing, the intention of the
parties determines whether the contract is one of
sale or barter:
If manifest intention is not clear: Barter
when the value of thing is more than the
amount of money or its equivalent,
otherwise, sale. (Art.1468)
C. CONTRACT FOR A PIECE OF WORK
SALE
Goods are manufactured
or procured in the
ordinary
course
of
business
For the general market,
whether on hand or not
CONTRACT FOR A
PIECE OF WORK
Goods are manufactured
for customer upon his
special order
Specifically for customer
The fact that the object were made by the seller

only when customers placed their orders, does
not alter the nature of the contract of sale, for it
only accepted such orders as called for the
employment of such materials as it ordinarily
manufactured or was in a position habitually to
manufacture such. (Celestino Co & Co vs.
Collector, 1956)
When each product or system executed is
always UNIQUE and could not mass-produce
the product because of its very nature, such is a
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SALES
V. Form
contract for a piece of work. (Commissioner vs.

Engineering Equipment and Supply Co.,
1975)
D. LEASE OF THINGS
SALE
No pre-existing debt
Creates an obligation
Price is more freely

agreed upon, fixed by the
parties
DACION EN PAGO
Pre-existing debt
Extinguishes
the
obligation
(mode
of
payment)
Price is value of the thing
given
There is a novation of the contract of loan into a

contract of sale when the creditor agrees to
accept a thing in payment of the debt. Hence, if
the thing given in payment turns out to belong to
another, the creditors remedy should be
governed by the law on sales, not loan.
(Baviera)
E. CONTRACT TO SELL
(Asked in 97, 01, 03)
Contract of Sale
Ownership is transferred
upon delivery
Non-payment
is
resolutory condition
Conditional Contract of
Sale
Sale is already perfected
A subsequent buyer is
presumed to be a buyer
in bad faith
Contract to Sell
Ownership
is
only
transferred
upon
full
payment of price
Full payment is a positive
suspensive
condition,
hence
non
payment
would not give rise to the
obligation to transfer
ownership
Contract to sell
No perfected sale yet
A subsequent buyer is
presumed to be a buyer
in good faith
NOTE: Contract to Sell is an executory contract,

while a Contract of Sale is a consummated
contract.
F. BILATERAL PROMISE TO BUY AND
SELL
(Asked in 80, 91)
A promise to buy and sell a determinate thing for
a price certain is reciprocally demandable. (Art
479, CC)
Like a sale, the thing must be determinate and
the price certain.
SALE
Consideration
Buyer: thing
Seller: price
Title passes to
the buyer
BILATERAL PROMISE TO BUY

AND SELL
Consideration is the promise
made by the other (Baviera)
No transfer of title
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Chapter II. Obligations of the Seller and

Buyer
I.
II.
I.
OBLIGATIONS OF THE SELLER

A. TO TRANSFER OWNERSHIP
B. TO WARRANT AGAINST EVICTION AND
HIDDEN DEFECTS
C. TO PRESERVE THE THING
D. TO PAY FOR THE EXPENSES FOR THE
EXECUTION AND REGISTRATION OF
THE DEED OF SALE
OBLIGATIONS OF THE BUYER
A. TO ACCEPT DELIVERY
B. TO PAY THE PRICE OF THE THING SOLD
Obligations of the Seller
Obligations of the Seller (TWPP)

1. Transfer ownership
2. Warrant against eviction and hidden defects
3. Preserve the thing
4. Pay for the expensed for the execution and
registration of the deed of sale
A. To transfer ownership
(Asked in 84, 98, 99, 03)
Obligation to transfer ownership and to deliver is
really implied in every contract of sale (Arts.
1458-1459)
Transfer of ownership requires delivery (Art.
1495)
General Concepts
1. Delivery comprises 2 obligations in Art.
1495:
a. Actual duty to deliver
b. Transfer of ownership can only be
accomplished via delivery
2. What to Deliver
a. Thing sold (Art. 1495)
b. Fruits (Art. 1164 & 1537)
c. Accessions and accessories (Art. 1166
& 1537)
Improvements by seller at his
expense grants him a usufructuary
right.
No indemnification
But he may remove it to the extent
that there is no damage (Art. 1538)
3. Where to Deliver
a. A hierarchy is followed (STOR):
Stipulation
Usage of trade
Sellers place of business (office)
Chapter II. OBLIGATIONS of the SELLER and BUYER
Sellers residence
b. In case of specific goods, which the

parties knew to be at some other place
when the contract was perfected, that
place is the place of delivery
c.
If goods are at the time of sale

possessed by a third person, then there
is no delivery until he acknowledges to
the buyer that he holds the goods for
buyer.
4. When to Deliver
Absent a stipulation as to time, delivery must
be made within a reasonable time; demand
or tender of delivery shall be made at a
reasonable hour.
Ways of Effecting Delivery
1. Actual Delivery
a. When deemed made: when the thing
sold is placed in the control and
possession of the vendee (Art. 1497)
b. Not always essential to passing of title
(Art. 1475)
c. Parties may agree when and on what
conditions the ownership in the subject
of the contract shall pass to the buyer
(example: Art 1478 where ownership will
only pass after full payment of the price)
2. Constructive Delivery
a. Execution of public instrument (Art
1498, par. 1)
General rule: produces the same
legal effects of actual delivery.
Exceptions:
The intention of the parties is
otherwise.
At the time of execution, the
subject matter was not subject
to the control of the seller which
must subsist for a reasonable
length of time after execution.
(Pasagui v Villablanca, 68
SCRA 18)
Control over thing sold must be
such that seller is capable of
physically transferring it to buyer
b. Symbolic Delivery
Delivery of keys of the place or
depositary where the movable is
stored or kept. (Art 1498, CC)
Unless otherwise agreed, when
symbolic delivery has been made,
the seller is not obliged to remove
tenants to place the buyer in actual
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possession of the property as he

has already complied with his
obligation to transfer ownership of
and deliver the thing sold. (Power
Commercial and Industrial Corp.
v. CA, 1997; Sabio v. The
International Corporate Bank,
Inc., 2001)
c.
Tradition Longa Manu (Long Hand)

Delivery
of
thing
by
mere
agreement.
Example: Seller points to the
property without actually transferring
physical possession thereof.
When an employer assigned all its
rights and title to all surplus property
salvaged by the contractor, tradition
longa manu takes place. Delivery is
upon the moment a thing is
salvaged. (Board of Liquidators v.
Floro, 1960)
d. Tradition Brevi Manu (Short Hand)

MOVABLE is delivered when the buyer
had the thing already in his possession
before the sale took place, not as owner
but as lessee, borrower, or depositary.
e. Tradition Constitutum Possessorium
Seller continues to be in possession of
the property sold, by virtue of a lease
contract agreement with the vendee.
f.
Delivery to a Common Carrier

General Rule: Delivery to the
courier or carrier tantamount to
delivery to buyer.
Exceptions
Seller reserved title by the form
of the bill of lading, with intent to
remain the owner, not merely for
the
purpose
of
securing
payment, OR
Contrary intent appears in the
contract (i.e. seller is required to
deliver goods to buyer at the
point of destination)
F.O.B.: Free on Board
When seller bears the expenses
of transportation up to the
F.O.B. point.
C.I.F.:
Cost,
Insurance,
Freight
Price quoted includes the costs
of the goods, insurance, and
freight charges on the goods up
to the point of destination.
F.A.S.: Free Alongside

Seller bears the expenses of
transportation until he delivers
the goods alongside a vessel at
a named port.
Completeness of Delivery
1. When may the seller refuse to deliver:
a. No payment yet or no period for
payment has been fixed in the contract
(Art.1524);
b. The buyer loses the right to make use
of the term, as when:
He becomes insolvent UNLESS he
gives a guaranty or security for the
debt;
He does not does not furnish the
seller the guaranties or securities he
promised;
He impairs the guaranties or
securities
or
they
disappear
fortuitously UNLESS he immediately
gives new ones equally satisfactory;
He violates any undertaking, in
consideration of which the seller
agreed to the period;
He attempts to abscond. (Art.1536)
2. Rules on Sales of Goods
a. When Quantity less than expected
Buyer may reject all
Buyer accepts with knowledge of
sellers inability to deliver the rest
buyer pays at contract price
Buyer has used or disposed prior to
knowing sellers inability to deliver
the rest buyer pays fair value
b. Quantity more than expected
If divisible, buyer may reject excess
If indivisible, buyer may reject all
c. Quality different or different goods
If divisible, buyer may accept the
goods compliant with contract and
reject those that are not
If indivisible, buyer may reject all
(Art. 1522)
d. Sale of specific mass of goods
In the sale of fungibles where the
measure or weight has not been
agreed upon nor is there a fixed rate
based upon a measurement, the
subject matter of the sale is a
determinate object the specific
mass; seller is merely required to
deliver such mass even if actual
quantity falls short of parties
estimate (Art. 1480)
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e. Delivery by installments
By default, buyer is not bound to
accept delivery of goods by
instalments
In a contract of delivery by
installment to be paid for via
installment as well, delay or breach
may not necessarily mean breach of
the entire contract; depending on
the circumstances, breach may be
severable and the aggrieved party
is entitled to damages and not
rescission. (Art. 1583)
3. Rules on Sales of Immovables
a. Sale at a fixed rate per unit of measure
Seller bound to deliver entire land
If the area is less than that stated,
buyer may rescind or demand a
proportionate reduction in price
If a part of the land is not of the
quality stated in the contract, buyer
may rescind
or
demand
a
proportionate reduction in price
Buyer may only avail of rescission if
the area deficiency is 10% or more
of total area or if the inferior value of
the part of the land exceeds 10% of
the price agreed upon. (Art. 1539)
If the area turns out to be greater
than that stated, buyer may accept
area included and reject the excess
or
accept
all
and
pay
a
proportionate increase in price (Art.
1540)
b. Sale for lump sum
Follows the same rule as the sale of
a specific mass which is explained
above
There is no change in price even if
area or number turns out to be
greater or lesser than that stated
(Art. 1542)
Exception: when the excess or
deficiency is no longer reasonable;
in Asian v Jalandoni, 1923, 644 sq
m was found to be unreasonable.
Exception to the exception: when
buyer expressly assumes risk on
actual area of the land. (Garcia v
Veloso, 1941)
If the price per unit or measure is
not provided for in the contract, then
the rules of lump sum sale should
prevail. (Sta. Ana v Hernandez,
1966)
Effect of Delivery
1. Delivery, generally, results in transfer of
ownership from seller to buyer.
2. As such, it also transfers the risk of loss of
the thing sold to the buyer.
3. Acceptance is not a condition for the
completeness of delivery; even with such
refusal of acceptance, delivery will be
deemed completed and produce its legal
effects.
4. By default, expenses of and incidental to
putting the goods into a deliverable state
must be borne by seller. (Art. 1521)
When delivery does not transfer title

1. Sale on approval, trial, or satisfaction
General Rule: Title remains with the seller
Exceptions:
a. Buyer signifies his approval or
acceptance to the seller or does any
other act adopting the transaction
b. Retains the goods without giving notice
of rejection after the time fixed has
expired, if no time has been fixed, after
the expiration of a reasonable time (Art
1502, CC)
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Difference between sale on approval and

sale on return
Sale on Approval
Ownership does not pass
upon delivery
Depends on the character

or quality of goods
Subject to a suspensive
condition
Risk of loss remains with
the seller
Sale on Return
Ownership
passes
upon
delivery, but buyer may revest
ownership in the seller by
returning or tendering the
goods within the time fixed in
the contract
Depends on the will of the
buyer
Subject
to
a
resolutory
condition
Risk of loss remains with the
buyer
2. Express Reservation
If it was stipulated that ownership in the
thing shall not pass to the purchaser until he
has fully paid the price. (Art 1478, CC)
3. Implied Reservation
The following are instances when there is an
implied reservation of ownership
a. Goods are shipped, but by the bill of
lading goods are deliverable to the seller
or his agent, or to the order of the seller
or his agent
b. Bill of lading is retained by the seller or

his agent.
c. When the seller of the goods draws on
the buyer for the price and transmits the
bill of exchange and bill of lading to the
buyer, and the latter does not honor the
bill of exchange by returning the bill of
lading to the seller.
4. When sale not valid
eg. When the thing sold is a public property
5. When Seller is not the owner
(Asked in 77, 78, 86, 87)
General Rule: Ownership is not acquired by
the buyer. One cannot give what one does
not have. (Art 1505, CC)
Exceptions: (RE-ROM)
a. Seller has a Right to transfer ownership
Seller need not be the owner of the
thing at the time of perfection of the
contract It is sufficient that seller has
a right to transfer ownership thereof
at the time it is delivered (Art. 1459)
One who sells something he does
not own yet is bound by the sale
when he acquires the thing later
(Bucton vs Gabar, 55 SCRA 469)
b. Estoppel: Owner is by his conduct
precluded from denying the sellers
authority to sell. (Art. 1434)
c. Registered land bought in good faith
General rule: Buyer need not go
beyond the Torrens title
Exception: When he has actual
knowledge
of
facts
and
circumstances that would impel a
reasonably cautious man to make
further inquiry
d. Order of courts Statutory Sale
In execution sale, the buyer merely
steps into the shoes of the judgment
debtor (Rule 39, sec. 33, ROC)
e. When goods are purchased in
Merchants store, Fair, or Market (Art
1505, CC)
The policy of the law has always
been that where the rights and
interest of the vendor clash with that
of an innocent buyer for value, the
latter must be protected. (Sun
Brothers and Co. V. Velasco,
(1958)
6. Sale by person having a voidable title

a. True owner may recover the thing when
provided the ff. requisites concur:
Subject matter is movable
Owner has either lost the thing or
has been unlawfully deprived. (Art
559, CC)
b. Reimbursement is necessary before
owner can recover when:
Buyer acted in good faith
Acquired at a public auction (Art
559, CC)
c. Recovery no longer possible when:
Buyer in good faith
Acquired it at a merchants store,
fair or market. (Art 1506, CC)
__________
B. To warrant against eviction & hidden
defects (Art. 1495; 1547)
Warranties
A statement or representation made by the seller
contemporaneously and as part of the contract
of sale, having reference to the character,
quality, or title of the goods, and by which he
promises or undertakes to ensure that certain
facts are or shall be as he then represents.
Effects of Warranties
1. Natural tendency is to induce buyer to
purchase the subject matter
2. Buyer purchases subject matter relying
thereon
3. Seller liable for damages in case of breach
Effects of Waivers
Only applicable to waiver of warranty against
eviction (see the following section) parties may
increase or decrease warranty against eviction
but the effect depends on good/bad faith of the
seller
1. Seller in bad faith and there is warranty
against eviction null and void
2. buyer without knowledge of a particular risk,
made general renunciation of warranty not
waiver but merely limits liability of seller in
case of eviction (pay value of subject matter
at time of eviction)
3. buyer with knowledge of risk of eviction
assumed its consequences and made a
waiver vendor not liable
4. waiver to a specific case of eviction wipes
out warranty as to that specific risk but not
as to eviction caused by other reasons
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Condition v. Warranty
Condition
Pertains to and affects
the existence of the
obligation
Non-happening does not
amount to breach of
contract
Must be stipulated
May attach to either to
the sellers duty to
deliver thing or some
other circumstance
Warranty
Goes
into
the
performance
of
an
obligation and may, in
itself, be an obligation
Non-fulfillment
constitutes breach of
contract
Stipulation or operation
of law
Always relates to the
subject matter or the
sellers obligations as to
the subject matter
If seller has promised that the condition

should happen or be performed, the
buyer may treat the nonperformance of
the condition as a breach of warranty.
(Art.1545)
Form
1. Express Warranty (APIR)
For there to be express warranty, the
following requisites must concur:
a. An affirmation of fact or any promise
relating to the thing sold;
b. The natural tendency of such affirmation
or promise is to induce the buyer to buy;
c. The buyer buys the thing relying
thereon. (Art. 1546)
d. Made before the sale not upon delivery
or any other point
An express warranty can be made by and
also be binding on the seller even in the sale
of a second hand article. (Moles v. IAC,
1989)
Express Warranty
What
is
specifically
represented as true in
said document cannot be
considered as mere
dealer's talk. (Moles v.
IAC, 1989)
Dealers or Traders
Talk
Affirmation of the
value of the thing or
statement
of
the
sellers opinion only
is not a warranty
unless:
- The seller made
it as an expert;
- It was relied upon
by the buyer.
(Art.1546)
Ordinarily, what does
not appear on the face
of
the
written
instrument (Moles v.
IAC, 1989)
Express Warranty
Concealment of facts
does not necessarily
amount
to
false
representation
False Representation
When concealment of
facts comes with an
active misstatement of
fact
or
a
partial
statement of fact such
that withholding of that
unsaid portion makes
that which is stated
absolutely false
However, buyer who
fails to inspect condition
of
property
despite
ample opportunity to do
so and no opposition on
the part of seller cannot
later on allege false
representation.
(Phil
Mftg Co. v Go Jucco,
1926) This is because
buyers duty to inspect
remains despite false
representation by the
seller. Buyer has the
duty to exercise due
diligence.
2. Implied Warranty
a. Implied Warranty of Title
b. Implied Warranty against Encumbrance
/ Non-Apparent Servitudes
c. Implied Warranty against Hidden
Defects (Art. 1547)
Implied
warranty
as
to
Merchantable Quality and Fitness
of Goods
Implied
warranty
against
Redhibitory Defect in the Sale of
Animals (Art. 1572)
Quality and Fitness of Goods in
Sale by Sample or Description
d. Other Warranties
Implied Warranty of Title
1. Implied warranty arises by operation of law
and need not be stipulated in the contract of
sale.
2. Warranty of Sellers Right to Sell: seller
warrants his right to sell at the time the
ownership is to pass.
Inapplicable to a sheriff, auctioneer,
mortgagee, pledgee, or other person
professing to sell by virtue of authority in
fact or law. (Art. 1547)
3. Warranty against Eviction: seller warrants
that buyer, from the time ownership passes,
shall have and enjoy legal and peaceful
possession of the thing. Its requisites are:
a. Buyer is deprived of the whole or a part
of the thing sold;
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b. Eviction is by final judgment

c. Final judgment based on a right prior to
the sale or an act imputable to the
vendor
d. Seller is summoned and made codefendant in the suit for eviction at the
instance
of
the
buyer. (Power
Commercial and Industrial Corp. v.
CA, 1997)
Implied Warranty against Encumbrance /
Non-Apparent Servitudes
Requisites for breach:
1. Thing sold is an immovable
2. Burden or servitude encumbering the thing
sold is
a. Non-apparent to the naked eye
b. Not mentioned in the agreement
c. Of such nature that it must be presumed
that the buyer would not have bought it
had he been aware thereof
d. Not recorded in the Registry of Property
unless there is an express warranty that
the thing is free from all burdens and
encumbrances (Art.1560)
Implied warranty against Hidden Defects
Requisites for breach:
1. The defect renders the thing sold unfit for
the use for which it was intended OR
diminishes its fitness for such use to such an
extent that had the buyer been aware
thereof, he would not have bought it or
would have paid a lower price;
2. The defect is not patent or visible;
3. The buyer is not an expert who, by reason of
his trade or profession, should have known
the defect
4. The seller is aware of the hidden fault or
defect, OR even he is not aware thereof, if
there is no stipulation to the contrary
(Arts.1561 &1566)
Implied warranty as to Merchantable Quality
and Fitness of Goods
Merchantable Quality:
1. Where the goods are brought by description
from a seller who deals in goods of that
description (Art.1562)
2. In a sale by sample, if the seller is a dealer
in goods of that kind and the defect is not
apparent on reasonable examination of the
sample (Art.1566)
Fitness for a particular purpose: Where the
buyer expressly or impliedly makes known to the
seller the particular purpose for which the goods
are acquired AND it appears that the buyer
relies on the
(Art.1562(1))
sellers
skill
or
judgment
Implied warranty against Redhibitory Defect

in the Sale of Animals (Art. 1572)
Redhibitory defect- a hidden defect of
animals of such nature that expert
knowledge is not sufficient to discover it,
even in case a professional inspection has
been made
No warranty in case of (Art. 1574):
a. Animals sold at fairs or public auctions
b. Livestock sold as condemned
The following sales are void (Art. 1575):
a. Sale of animals suffering from
contagious diseases
b. Sale of animals unfit for the purpose for
which they are acquired as stated in the
contract
Veterinarian liable if he fails to discover or
disclose the hidden defect through
ignorance or bad faith (Art 1576)
Seller liable if animal dies within 3 days after
its purchase due to a disease that existed at
the time of sale. (Art 1578)
Other Warranties
1. Warranty in Sale of Consumer Goods
Consumer goods goods primarily for
personal, family, household or agricultural
purposes, which shall include but not limited
to food, drugs, cosmetics, and devices
:
(Sec.4(q), RA 7493 Consumer Act of the
Phil)
Kinds:
a. Full warranty- if the written warranty
meets the minimum standards
b. Limited warranty- if the written warranty
does not meet the minimum standards
(Sec.6(c), RA7394)
Minimum standard for warranties that the
warrantor shall:
a. Remedy such consumer product within
a reasonable time and without charge in
case of a defect, malfunction or failure to
conform to such written warranty;
b. Permit the consumer to elect whether to
ask for a refund or replacement without
charge of such product or part, as the
case may be, where after reasonable
number of attempts to remedy the defect
or malfunction, the product continues to
have the defect or to malfunction
The warrantor will not be required to perform
the above duties if he can show that the
defect, malfunction or failure to conform to a
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written warranty was caused by damage due

to unreasonable use thereof. (Sec.68(d), RA
7394)
2. Warranty in sale of Subdivision Lot or
Condominium Units
The owner or developer shall be answerable
and liable for the facilities, improvements,
infrastructures
or
other
forms
of
development represented or promised in
brochures, advertisements and other sales
propaganda disseminated by the owner or
developer or his agents and the same shall
form part of the sales warranties enforceable
against said owner or developer, jointly and
severally.
(Sec.19,
PD
957:
The
Subdivision and Condominium Buyers
Protective Decree)
__________
C. To preserve the thing, pending delivery,
with proper diligence (Art. 1163)
Duration: From the perfection of sale until
delivery (Art 1480)
Default standard of care: Diligence of a good
father of a family
General rule: seller is liable for loss or
deterioration (Art. 1174)
Exception: fortuitous event (Art. 1174)
Exception to exception: seller is still liable for
fortuitous event if
1. Law provides for it (e.g. delay or promising
to deliver the same thing to 2 or more
persons with different interests Art. 1165)
2. By stipulation
3. Nature of obligation requires assumption of
risk
Fungibles sold for a price fixed according to
weight, number or measure: duty to preserve
begins only after the things are weighed,
counted or measured except when seller is
already in delay.
__________
D. To pay for the expenses for the execution
and registration of the deed of sale (Art.
1487)
General rule: The seller has the duty to pay for
the expenses for the execution and registration
of the deed of sale
Exception: if there is a stipulation to the

contrary (Art. 1487)
Expenses incurred subsequent to the transfer of
title are to be borne by the buyer, unless caused
by the fault of the seller
II. Obligations of the Buyer

Obligations of the Buyer
1. To Accept delivery
2. To Pay the price of the thing sold
Pertinent Rules
1. In a contract of sale, the seller is not
required to deliver the thing sold until the
price is paid nor is the buyer required to pay
the price before the thing is delivered in the
absence of an agreement to the contrary
(Art 1524)
2. If stipulated, then the buyer is bound to
accept delivery and to pay the price at the
time and place designated
3. If there is no stipulation as to the time and
place of payment and delivery, the buyer is
bound to pay at the time and place of
delivery
4. In the absence also of stipulation, as to the
place of delivery, it shall be made wherever
the thing might be at the moment the
contract was perfected (Art. 1521)
5. If only the time for delivery of the thing sold
has been fixed in the contract, the vendee is
required to pay even before the thing is
delivered to him.
First Obligation: accept delivery
1. Form
a. Express: buyer intimates acceptance
b. Implied:
Goods delivered to the buyer and he
does any act in relation to them that
is inconsistent with the ownership of
the seller.
After the lapse of a reasonable time,
the buyer retains the goods without
intimating to the seller that he has
rejected them. (Art.1585)
2. Manner
Right
of
Inspection:
reasonable
opportunity to examine the goods upon
delivery. If there is a stipulation that delivery
is preconditioned on payment, then buyer
has no right of inspection until he has paid.
(Art.1584) Exception: in case such right of
inspection is permitted by agreement or
usage trade.
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3. Effect of Refusal to accept

a. If buyer refuses to accept goods, having
the right to do so, he is not bound to
return them to the seller; it being
sufficient that he notifies the seller of his
refusal to accept
If he voluntarily constitutes himself a
depositary of the goods, he shall be
liable as such. (Art.1587)
b. Unjust refusal to accept still results to
transfer of ownership; title to the goods
passes to the buyer from the moment
they are placed at his disposal, except if
ownership has been reserved by the
seller (Art.1588)
Second Obligation: pay the price of the thing
sold (Art. 1582)
1. Payment of interest
Buyer is liable for interest when: (SFD)
a. Interest is stipulated;
b. Thing sold produces fruits or income;
c. Buyer is in default - interest accrues
from the time of judicial or extrajudicial
demand for payment
2. Suspension of payments
Buyer may suspend payment when:
a. his ownership or possession of the thing
is disturbed or
b. he has reasonable grounds to fear such
disturbance by a vindicatory action or a
foreclosure of mortgage
Exceptions:
buyer
cannot
suspend
payment when:
a. seller gives security for the return of the
price in a proper case
b. it
has
been
stipulated
that,
notwithstanding any such contingency,
the buyer shall be bound to pay (Art.
1590)
Suspension may continue until the seller has
caused the disturbance or danger to cease
A mere act of trespass shall not
authorize the suspension of the
payment. (Art.1590)
3. Sale of real property
In the sale of immovable property, buyer
may pay even beyond the expiration of
the period agreed upon, as long as no
demand for rescission of the contract
has been made upon him either
judicially or by a notarial act, despite a
stipulation providing for ipso jure
rescission (Art.1592) (Asked in 88, 00)
After demand, court may not grant him a
new term (Heirs of Escanlar, et.al. v.

CA, 1997)
R.A. 6552 (Maceda Law) applies to
sale or financing of real estate on
installment
(Rillo
v.
Court
of
Appeals,1997)
Buyer is awarded a grace period of
1 month per year of installments
paid or 60 days, whichever is
higher, within which he may pay
without additional interest
o may be used once every 5
years of the life of the contract
or any of its extensions
If contract is to be cancelled, seller
must first:
o 30 day notice of cancellation,
and
o refund cash surrender value to
buyer; amount is equivalent to
50% of total payments made
including deposits, options and
down-payments plus 5% for
every year in excess of 5 years
of the life of the contract or any
of its extensions
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Chapter III. Double Sales

(Asked in 77, 87, 89, 98, 01, 04)
I. General Rule
II. Requisites
III. Rules
governing
sale
of
movables,
immovables and unregistered lands
IV. Purchaser in good faith
I.
General Rule
Prior tempore, potior jure (he who is first in time

is preferred in right) applies.
II. Requisites
Requisites (Cheng v Genato, 1998)
1. 2 or more valid sales;
2. Same subject matter;
3. 2 or more buyers with conflicting interests at
odds over the rightful ownership of the thing
sold;
4. Same seller
III. Rules Governing Sale of Movables,

Immovables and Unregistered Lands
A. Sale of Movables
Ownership shall be transferred to the person
who may have first taken possession in
good faith.
B. Immovables
1. Ownership belongs to the person who:
a. In good faith first recorded in the
Registry of Property; OR
b. If there is no inscription, ownership
passes to the person who in good faith
was first in possession; OR
c. In the absence thereof, to the person
who
presents the
oldest title,
PROVIDED there is good faith. NOTE:
good faith is required all the time.
NOTE:
a. Oldest Title any public document
showing acquisition of the land in good
faith.
To
constitute
title,
the
transmission of ownership must appear
in a public document [Art. 1358 (1)]
b. Examples: Deed of Sale, Deed of
Donation, Deed of Trust
2. Registration includes any entry made in the
Primary Entry Book of the registry, including
Chapter III. DOUBLE SALES
both registration in its ordinary and strict

sense and cancellation, annotation, and
even marginal notes. (Cheng v. Genato,
1998)
NOTE: Pencilled entries on the title are not
considered registration (AFPMBAI v.
Court of Appeals, 1999).
C. Sale by Virtue of Execution and
Attachment
Art. 1544 does NOT apply to the sale of
unregistered land at an execution sale
because a buyer of unregistered land at a
execution sale only steps into the shoes of
the judgment debtor, and merely acquires
the latter's interest in the property sold as of
the time the property was levied upon.
(Carumba v. CA, 1970)
D. Sale of Unregistered Land

1. Instrument
or
deeds
establishing,
transmitting, acknowledging, modifying or
extinguishing rights with respect to lands not
registered under the Land Registration Act
or the Spanish Mortgage Law, are required
to be registered in the Registry of Property
rd
to prejudice 3 persons, although such
registration is understood to be w/o
rd
prejudice to a 3 party with a better right.
(PD 1528 Sec 113)
2. Art. 1544 applies to unregistered land
subject to a conventional sale (because of
Art. 1358) but NOT to unregistered land
subject to judicial sale.
E. Purchaser in good faith
(Asked in 76, 86, 08)
1. General Characteristics
a. One who buys the property of another,
without notice that some other person
has a right to or interest in such
property, and who pays a full and fair
price for the sale, at the time of the
purchase or before he has notice of the
claim/interest of some other person in
the property. (Agricultural and Home
Extension Development Group v CA,
1992)
b. A buyer could not have failed to know or
discover that the land sold to him was in
adverse possession; hence he is
deemed to have acted in bad faith.
(Heirs of Ramon Duran v Uy, 344
SCRA 238)
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CIVIL LAW REVIEWER
Chapter III. DOUBLE SALES
2. Presumption
Gen Rule: As a rule, he who asserts the
status of a purchaser in good faith and for
value, has the burden of proving such
assertion. This onus probandi cannot be
discharged by mere invocation of the legal
presumption of good faith, i.e., that everyone
is presumed to act in good faith (Mathay v
CA, 295 SCRA 556)
When buyer is presumed to be in bad
faith:
a. Annotation of adverse claim: Places
any subsequent buyer of the registered
land in bad faith. (Balatbat v CA, 261
SCRA 128)
b. Annotation of Lis Pendens: Buyer
cannot be considered an innocent
purchaser for value where it ignored the
lis pendens on the title.
Annotation of Adverse
Claim
may be cancelled only in
one instance, i.e., after the
claim is adjudged invalid
or unmeritorious by the
Court
maybe cancelled even

before the action is
finally terminated for
causes which may not
be attributable to the
claimant
Both are intended to protect the interest of a
claimant by posing as notices and caution to those
said with the property that same is subject to a
claim.
NOTE: The two are not contradictory or

repugnant to one another; nor does the
existence of one automatically nullify the
other, and if any of the registrations should
be considered unnecessary or superfluous,
it would be the notice of lis pendens (A.
Doronila Resources Development Inc v CA,
1988)
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Chapter IV. RISK of LOSS
Chapter IV. Risk of Loss

I.
II.
GENERAL RULE
EXCEPTION
I.
General Rule
Res perit domino: Owner bears risk of
loss
Ownership is not transferred until delivery
II. Exceptions
TOTAL LOSS
Contract
ineffective.
is
Because there
can be no contract
without an object
c.
PARTIAL LOSS (Or loss

which
results
in
substantial change in
character)
Buyer may withdraw from
the contract
OR
Buy the remainder at a
proportionate price
When loss occurs after perfection but

before delivery
Seller bears risk of loss
Buyer does not bear risk of loss until
goods are delivered to him
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SALES
1. Contrary stipulation
2. An obligation to deliver a generic thing is
not extinguished by loss. (Art 1263, CC)
3. Risk of loss of specific things is subject to
the ff:
a. When loss occurs before perfection,
such loss is borne by seller
b. When loss occurs at time of perfection,
loss must have occurred before the
contract was entered into, without the
knowledge of both parties
CIVIL LAW REVIEWER
Chapter V. DOCUMENTS of TITLE
I. IN GENERAL
II. NEGOTIABLE DOCUMENTS OF TITLE
III. NON-NEGOTIABLE DOCUMENTS OF TITLE
I.
In General
Definition
A document used in the ordinary course of
business in the sale or transfer of goods, as
proof of the possession or control of the goods,
or authorizing or purporting to authorize the
possessor of the document to transfer or
receive, either by endorsement or by delivery,
goods represented by such document. (Art.
1636)
Examples: bill of lading, quedan, warehouse
receipts, trust receipts
Purpose
1. Evidence of possession or control of goods
described therein
2. Medium of transferring title and possession
over the goods described therein without
having to effect actual delivery thereof
(Villanueva)
3. The custody of a negotiable warehouse
receipts issued to the order of the owner, or
to bearer, is a representation of title upon
which bona fide purchasers for value are
entitled to rely, despite breaches of trust or
violations of agreement on the part of the
apparent owner. (Siy Cong Bieng vs.
HSBC, 56 Phil 598)
II. Negotiable Documents of Title

Definition
Document of title which states that the goods
referred to therein will be delivered to the bearer,
or to the order of any person named in such
document (Art. 1508, CC).
TERMS
OF
THE
DOCUMENT
Goods are deliverable to
bearer
Endorsed in blank by the
person to whose order the
goods were deliverable
Goods are deliverable to
the order of a specified
person
HOW NEGOTIATED
Who may negotiate it? (Art.1512,CC)

1. Owner
2. Person to whom the possession or custody
of the document has been entrusted by the
owner
a. If bailee undertakes to deliver the goods
to such person
b. If document is in such form that it may
be negotiated by delivery
A person to whom a document has been
negotiated acquires
1. Rights of the vendor
2. Rights of the original consignee
A person who negotiates a document of title
warrants
1. Genuineness of document
2. Legal right to negotiate or transfer
3. No knowledge of fact which would impair the
validity or worth of the document
4. Right to transfer the title to the goods and
merchantability or fitness for a particular
purpose, whenever such warranties would
have been implied had the contract been
transfer the goods without a document
He does not warrant that
1. Common carrier will fulfill its obligation to
deliver the gods
2. Previous indorsers will fulfill their obligation
(Art. 1516-1517, CC)
Goods in the hands of the carrier covered by
a negotiable document cannot be attached or
levied upon, UNLESS
1. Document is first surrendered to the carrier;
or
2. Impounded by the court; or
3. Its negotiation is enjoined. (Art. 15191520,CC)
III. Non-Negotiable Documents of Title
By delivery of the
document to another
By indorsement of
such
person
(Art.
1509,CC)
Goods described in a non-negotiable

document of title are deliverable only to a
specified person
Carrier will not deliver the goods to any
holder of the document or to whom such
document may have been endorsed by the
consignee
Must present the deed of sale or donation in
his favor
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Chapter V. Documents of Title
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Negotiation [negotiable document of

title] VS. Transfer [non-negotiable
document of title]:
Negotiation (Art. 1508)

Delivery of a negotiable
document of title to
another if by the terms
thereof, the goods are
deliverable to bearer, or
when the document was
endorsed in blank by
the person to whose
order the goods are
deliverable.
In a negotiable
document of title, the
buyer may acquire a
better title.
Transfer
The assignment of rights
of the consignee of a
non-negotiable document
of title to another; or
Document of title was
ordered sold or assigned,
without indorsement.
Transferee does not

acquire a better title than
his transferor
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Chapter V. DOCUMENTS of TITLE
Chapter VI. Remedies of the Seller and

Buyer
I.
GENERAL REMEDIES
A. SPECIFIC PERFORMANCE
B. RESCISSION
C. DAMAGES
II. REMEDIES OF THE SELLER
A. IN THE SALE OF MOVABLES
1. EXTRAJUDICIAL REMEDIES
2. JUDICIAL REMEDIES
B. IN THE SALE OF IMMOVABLES
1. RESCISSION FOR ANTICIPATORY
BREACH
2. SPECIFIC
PERFORMANCE
WITH
DAMAGES
3. RESCISSION WITH DAMAGES
4. MACEDA LAW
III. REMEDIES OF THE BUYER
A. FOR BREACH OF OBLIGATION TO
PRESERVE
B. FOR BREACH OF OBLIGATION TO
DELIVER
C. FOR BREACH OF WARRANTY
I.
General Remedies (Art. 1191, CC)
The following remedies arise from the bilateral

nature of the contract of sale:
1. Specific performance (Asked in 02)
2. Rescission (Asked in 03, 08)
General rule is that rescission of a
contract will not be permitted for a slight
or casual breach, but only for such
substantial and fundamental breach
as would defeat the very object of the
parties in making the agreement. (Song
Fo & Co. vs. Hawaiian-Philippine Co.,
(1925))
3. Damages
Neither party incurs in delay if the other does not
comply or is not ready to comply in a proper
manner with what is incumbent upon him (Art
1169, CC)
Prescriptive periods
1. 10 years if based on written contract
2. 6 years if based on oral contract
II. Remedies of the Seller

A. In the Sale of Movables
1. Extrajudicial or Self-Help Remedies
[NOTE: No need to resort to the courts; as
long as possession of the goods has not yet
passed to the buyer]
Chapter VI. REMEDIES of the SELLER and BUYER
a. Possessory lien over the goods

Right to retain possession of goods until
payment or tender of the whole price, or
unless he agrees to sell on credit (15261529, 1503, 1535)
When available:
Goods are sold without stipulation
as to credit
Goods are sold on credit, but term
of credit has expired
Buyer becomes INSOLVENT
When lost:
Seller delivers goods to carrier or
other bailee for transmission to the
buyer under a straight or nonnegotiable bill of lading
Buyer/his agent lawfully obtains
possession of goods
Seller waives it
Not lost in remainder of goods
when only partial delivery is
made (unless such is symbolic
delivery of the whole)
Not lost by mere fact that seller
obtained a judgment for the
price
When revived: Goods are returned by
the buyer in a wrongful repudiation of
the contract
b. Right of stoppage in transitu
An extension of the lien for the price;
entitles unpaid seller to resume
possession of the goods while they are
in transit before the goods come in
possession of the vendee (1530-1532,
1535, 1636[2])
Available when:
INSOLVENT
Vendee
becomes
When are goods in transit?

From time of delivery to the
carrier or other bailee by the seller,
for the purpose of transmission to
the buyer, until the buyer or his
agent takes such delivery from the
carrier.
Even when goods have reached
their ultimate destination, if buyer
rejects them and carrier retains
possession
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To terminate transit by delivery

to a middleman, delivery must
be to keep, not to transport.
When are goods no longer in transit?

Buyer obtained delivery of the
goods before such have reached
their ultimate destination
Goods have arrived at ultimate
destination, but carrier refuses to
deliver
Carrier enters into a new contract
with the buyer upon arrival of the
goods at their ultimate destination
How exercised?
By obtaining actual possession of
the goods
By giving notice of his claim to the
carrier/other
bailee
who
has
possession of the goods
Carrier must redeliver goods to
seller, or according to his
instructions
Carrier not obliged to redeliver
until the negotiable document of
title,
if
any,
has
been
surrendered for cancellation
Sellers right to stoppage in transitu not
affected even if buyer has sold or
disposed of the goods; Unless the seller
assented
c.
Special right of resale
Effects:
Seller is no longer liable to the
original buyer upon the contract of
sale or for any profit made by the
resale
Buyer at resale acquires good title
as against the original owner
In case resale is at a loss, seller
entitled to recover the difference
from the original buyer
Seller may recover damages from
original buyer for breach of contract
d. Special right to rescind:
RETURN of the title over the
undelivered goods to the seller, and
right to recover DAMAGES for breach of
contract (1534)
Available to unpaid seller who has a
right of lien or who has stopped the
goods in transitu
When available:
Seller expressly reserved right to
rescind in case buyer defaults
Buyer has been in default in
payment for an unreasonable time
Transfer of title shall not be held to have
been rescinded by the unpaid seller until
he manifests by notice to the buyer or
some other overt act an intention to
rescind.
Available to unpaid seller who has a

right of lien or who has stopped the
goods in transitu (1533)
2. Judicial Remedies of an unpaid seller

a. Action for the price or specific
performance (1595)
Purpose: For seller to liquidate his

damages
He must do so within a reasonable
time and in such manner as to
obtain the best price possible.
Resale = fair sale if in accordance
with established business practices,
with no attempt to take advantage of
the original buyer.
Resale may be in a private or public
sale, but seller cannot buy indirectly
or directly.
For resale to be valid, buyer need
not be notified of an intention to
resell or the time and place of the
resale.
Conditions:
the goods has passed to the buyer
Price is payable on a certain day,
irrespective of delivery of the goods
Buyer can set up the defense that
seller could not or did not intend to
deliver the goods
Seller was notified by the buyer of
his repudiation of the contract after
the seller has completed the
manufacture of the goods/had
procured the goods to be delivered
and the goods could not readily be
resold for a reasonable price
b. Action
for
damages
for
nonacceptance, if buyer wrongfully neglects
or refuses to accept and pay for the
goods (1596)
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Measure of damages: Estimated loss

directly and naturally resulting in the
ordinary course of events from the
buyers breach
Where there is available market for
goods: Difference between the
contract price and the market price
at the time the goods ought to have
been accepted or if no time was
fixed, at the time of refusal to accept
If the resale was made with
diligence, resale price is evidence of
market value, taking into account
whether or not the goods could be
readily sold
Where
labor/expense
was
necessary for seller to fulfill his
obligation: Labor performed and
expenses made by seller before
receiving
notice
of
buyers
repudiation or countermand
Profit that the seller would have
made if sale had been fully
performed
c.
Rescission by giving the buyer notice of

the election to rescind (1597)
Under this rule, rescission would bar an
action on the contract because it means
cancellation
of
the
contractual
obligations
between
the
parties.
(Baviera)
d. Special rule for sale of movables by

instalments Recto Law (1484, 1485)
(Asked in 99)
Applies in cases of:
Sale of movables in installment
Levy Hermanos vs. Gervacio,
(1939): The rule is intended to
apply to sales of movables, the
price of which is payable in 2 or
more installments, but not to
straight-term sales where the
price is payable in full, after
making a down payment
because the law aims to protect
improvident buyers who may be
tempted to buy beyond their
means.
Lease of personal property with
option to buy
When lessor has deprived the
lessee of the possession or
enjoyment of the thing (Ex.
When lessor files a complaint
for replevin against lessee)
Also applies when seller assigns

his credit to someone else
Alternative Remedies of the unpaid

seller under Recto Law
Specific Performance
Cancellation of sale: If vendee fails
to pay 2 or more installments
When the seller cancels the sale
by repossessing the property
sold, he is barred from exacting
payment for its price.
Foreclosure of Chattel Mortgage: If
vendee fails to pay 2 or more
installments
If seller chooses this remedy, he
shall have no further action to
recover any unpaid balance,
and any stipulation to the
contrary shall be void
Motors vs. Sapinoso, (1970):
What Art 1484 (3) prohibits is
further action against the
purchaser to recover any unpaid
balance of the price; and
although
this
Court
has
construed the word action to
mean
any
judicial
or
extrajudicial
proceeding
by
virtue of which the vendor may
lawfully be enabled to exact
recovery of the supposed
unsatisfied balance of the
purchase
price
from
the
purchaser or his privy, there is
no occasion at this stage to
apply the restrictive provision of
the said article because there
has not yet been a foreclosure
sale resulting in a deficiency.
The payment of the sum of
P1,250 of Sapinoso was a
voluntary act on his part and did
not result from a further action
instituted by Northern Motors.
Bachrach Motor Co., Inc. v.
Millan, (1935): Purpose of the
law is to remedy the abuses
committed in foreclosure of
chattel mortgages. It prevents
mortgagees from seizing the
mortgaged property, buying it at
foreclosure sale for a low price
and then bringing the suit
against the mortgagor for a
deficiency
judgment.
The
almost invariable result of this
procedure
was
that
the
mortgagor found himself minus
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the property and still owing

practically the full amount of his
original indebtedness.
4. Maceda Law: Sale of Residential Realty

on Installments
(Asked in 77, 89, 99, 00)
Nonato vs. IAC (1985): Remedies are

ALTERNATIVE, not cumulative, i.e.
exercise of one bars exercise of the
others
RA 6552: An Act To Provide Protection for

Buyers of Real Estate on Installment
Payments
NOTE: Unpaid Seller (1525):

e. When the whole of the price has not
been paid or tendered;
f. When a bill of exchange or other
negotiable instrument has been received
as conditional payment, and the
condition on which it was received has
been broken by reason of the dishonor
of the instrument, the insolvency of the
buyer, or otherwise.
_________
B. In the Sale of Immovables
1. Rescission for Anticipatory Breach
(1591)
a. Available when seller has reasonable
grounds to fear the loss of the
immovable property sold and its price
b. Example: Buyer destroys the building
sold, there being no security therefor,
and buyer becomes insolvent
c. Court has no discretion to compel the
seller to wait for the expiration of the
period to pay, or to grant the buyer more
time to pay
2. Specific Performance + Damages (1191)
a. Seller may choose between specific
performance and rescission, with
damages in either case
b. Court has discretion, for a just cause, to
give the buyer more time to pay even if
the seller chooses rescission
3. Rescission + Damages (1191)
a. If seller chose specific performance, and
such becomes impossible, he may still
avail of rescission
b. If absolute sale, seller must make a
demand for rescission
Judicially, OR
By a notarial act
c. Necessary even if automatic rescission
is stipulated
d. Effect of lack of demand: Buyer can still
pay
e. Effect of demand: Court may not grant
buyer a new term
DOES not apply to:

a. Industrial lots
b. Commercial buildings
c. Sale to tenants under
Reform Code (RA 3844)
Agricultural
Imposes ADDITIONAL REQUIREMENTS

FOR A VALID RESCISSION:
a. If buyer has paid at least 2 years of
installments: GRN
Grace period: 1 month per year of
installment payments made. BUT
buyer may only avail of it only once
in every 5 years
Refund of Cash Surrender Value
(CSV): 50% of total amount paid +
st
5% for every year after the 1 5
years of installments
BUT not greater than 90% of
total amount paid
Notice of cancellation of demand for
rescission by notarial act, effective
30 days from the buyers receipt
thereof and upon full payment of
CSV
b. If buyer has paid less than 2 years: GN
Grace period: at least 60 days
Notice of cancellation or demand for
rescission by notarial act, effective
30 days upon receipt thereof
c.
Down payments, deposits, or options on

the contract shall be included in the total
number of installments made
d. Seller may go to court for judicial

rescission in lieu of a notarial act of
rescission
e. During the grace period, buyer shall
have the right:
To sell or assign his rights, to be
evidenced in a notarial instrument
To update his account
To pay in advance any installment,
or the full unpaid balance of the
price, without any interest
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III. Remedies of the Buyer
General rule: Courts will refuse to decree

specific performance with respect to
chattels, because damages are a sufficient
remedy
Exception: Buyer is entitled to the specific
thing which to him has special value and
which he cannot readily obtain in the market
OR where damages would not furnish a
complete and adequate remedy (Baviera)
_________
A. Remedy for breach of obligation to
preserve
If thing is lost
1. Without fault of seller: No breach; Obligation
is extinguished
2. Through fault of seller (or through fortuitous
event, if seller is liable): Damages
A thing is lost when it
1. Perishes
2. Goes out of commerce
3. Disappears in such a way that its existence
is unknown or it cannot be recovered
If thing deteriorates
Without fault of seller
No breach
Impairment shall be
borne by buyer
Through fault of seller

Rescission + damages
Or
Specific performance +
damages
deficiency from goods of the same kind and quality,

UNLESS a contrary intent appears.
Real Estate (1539-1543)

1. If at the rate of a certain price per unit of
measure or number:
Less (in area or quality) than
what was agreed upon:
Proportional reduction of price
OR
Rescission, if:
Lack in area is at least 1/10
of what is stated, or inferior
value of thing sold exceeds
1/10 of price
Buyer would not have
bought the property has he
been aware of the inferior
quality or smaller area
More
Reject the excess
OR
Accept the whole
and pay at contract
rate
[NOTE: Also applies to judicial sales (1541)]

2. If for a lump sum:
Everything
is
within
boundaries, even if less or
more than stated area
No remedy
Rudolf Lietz, Inc. v. CA,
(2005): Where both the area
and the boundaries of the
immovable are declared, the
area covered within the
boundaries of the immovable
prevails over the stated area.
Not everything is
within boundaries
Proportional
reduction in price
OR
Rescission
_________
B. Remedy for breach of obligation to
deliver
Delivery of wrong quantity (1522)
Goods are less than what
was contracted
Reject the goods
OR
Accept and pay
At contract rate if buyer
accepts knowing that seller
wont perform in full
At fair value: If goods were
used before knowing that
seller wont be able to
perform in full
More
Reject the excess (Or
the
whole,
if
indivisible)
OR
Accept the whole and
pay at contract rate
Art. 1464. Civil Code. In the sale of an undivided

share of a specific mass of fungible goods, if the
mass contains less than the number, weight, or
measure bought, the buyer becomes the owner of the
whole mass and the seller is bound to make good the
Prescriptive period: 6 months, counted from

date of delivery
_________
C. Remedy for breach of warranty
Express Warranty
1. Prescriptive period: Period specified in
express warranty OR 4 years, if no period is
specified (following the general rule on
rescission of contracts)
2. Remedies:
a. Accept
goods
+
demand
diminution/extinction of price
b. Accept goods + damages
c. Refuse to accept goods + damages
d. Rescind (Refuse to accept or return or
offer to return) + recover price paid
3. Rescission not available when buyer:
a. Knew of breach of warranty when he
accepted the goods without protest
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b. Fails to notify the seller about election to

rescind within a reasonable period of
time
c. Fails to return or offer to return the
goods to the seller in substantially a
good condition as they were when
delivered, unless deterioration was due
to breach of warranty
4. Measure of damages: Difference between
value of goods at time of delivery and the
value they would have had if they had
answered to the warranty
5. Effects of rescission:
a. Buyer no longer liable for price
Entitled to return of any part of price
paid,
concurrently
with
or
immediately after an offer to return
the goods
b. If seller refuses to accept offer to return
goods: buyer deemed bailee for seller
and has right of lien to secure payment
of part of price paid
Implied
warranty
(1555,1556)
TOTAL EVICTION
Enforce
liability
for
eviction
- Demand from seller:
VICED
Value of thing sold at

time of eviction
Income or fruits, if he
has been ordered to
deliver them to the
party who won the
eviction suit
Costs of eviction suit

and in a proper case,
suit against seller for
warranty
Expenses of the
contract, if buyer has
paid them
Damages
and
interests,
and
ornamental
expenses, IF sale
was made in bad
faith
against
c.
If property sold for nonpayment of taxes

due and not made known to the buyer
before the sale: seller liable
d. Judgment debtor also responsible for
eviction in judicial sales, unless it is
otherwise decreed in the judgment
2. If there is waiver of warranty:
a. Seller acted in bad faith: Waiver is void,
seller liable for eviction
b. Buyer made waiver without knowledge
of risks of eviction: Seller liable only for
the value of thing sold at time of eviction
c. Buyer made waiver with knowledge of
risks: Seller not liable, buyer assumed
the consequences
Implied warranty against encumbrances
(1560)
1. Rescission: Within 1 year from execution of
deed of sale OR
2. Damages: Within 1 year from execution of
deed of sale or discovery of the burden or
servitude
eviction
PARTIAL EVICTION
Enforce liability (demand
VICED)
OR
Rescind
If he would not have
bought the thing sold
without the part lost BUT
he must return the thing
without
other
encumbrances
than
those which it had when
he acquired it
1. Rules:
a. Buyer need not appeal from decision to
hold seller liable for eviction
b. When adverse possession commenced
before sale, but prescription period
completed after transfer: seller is not
liable
Implied warranty against hidden defects

(1567-1571)
1. If thing is not lost:
a. Withdraw
from
contract
(accion
redhibitoria) + damages
b. Demand a proportionate reduction of the
price (accion quanti minoris) + damages
2. If thing is lost:
Due to hidden
fault
If seller aware of
defect, buyer may
demand:
- Return of price
Refund
of
expenses
of
contract
- Damages
Due to fortuitous event

or fault of buyer
Demand:
- Price paid minus value of
thing when it was lost
- Damages, if seller acted
in bad fait
If seller not aware

of defect:
Buyer may demand
price and expenses
BUT NOT damages
Prescriptive period: 6 months from delivery

Implied warranty against redhibitory defects
of animals
1. Remedies
a. Withdraw from contract + damages
b. Demand a proportionate reduction of the
price + damages
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2. If sale is rescinded:
a. Buyer must return animal in condition in
which it was sold and delivered
b. Buyer shall be liable for injury due to his
negligence.
3. Prescriptive period: 40 days from delivery
Warranty in sale of consumer goods (RA
7394, Sec.68)
If implied warranty accompanies express
warranty, both will be of equal duration.
IMPLIED WARRANTY
1. Retain the goods
and
recover
damages
OR
2. Reject the goods,
cancel contract and
recover from seller
so much of the
purchase price as
has been paid +
damages
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EXPRESS WARRANTY
1. Demand repair within
30 days
Extendible
for
causes beyond the
control
of
the
warrantor
2. Demand refund of
price minus amount
directly attributable to
the
use
of
the
consumer prior to the
discovery of the nonconformity
Chapter VII. Extinguishment of Sale

I.
II.
III.
IV.
IN GENERAL
CONVENTIONAL REDEMPTION
EQUITABLE MORTGAGE
LEGAL REDEMPTION
I.
In General
Generally, extinguished by the same causes as

all other obligations (Arts.1600 &1231) (P3
3
PLAN-C -R )
1. Payment/performance
2. Prescription
3. Loss of thing due
4. Annulment
a. Novation
5. Condonation/remission
6. Confusion/merger
7. Compensation
8. Rescission
9. Resolutory condition fulfilled
10. Redemption (Conventional or Legal)
II. Conventional Redemption

Definition
1. Vendor reserves the right to repurchase the
thing sold, with the obligation to comply with
the provisions of Article 1616 and other
stipulations which may have been agreed
upon. (Art 1601,CC)
2. Available when the seller reserves the right
to repurchase the thing sold in the same
instrument of sale as one of the stipulations
of the contract (Villarica v CA, 1968)
Period (Asked in 77)
General Rule: Follow period stipulated in
contract, but should not exceed 10 years.
1. If no period stipulated, then it shall be four
years from the execution of the contract
2. But vendor may still exercise the right to
repurchase within thirty days from the time
final judgment was rendered in a civil action
on the basis that the contract was a true
sale with right to repurchase
By whom exercised
1. Vendor
2. His heirs, assigns or agents
3. Creditor, if he has exhausted the property of
the vendor
Chapter VII. EXTINGUISHMENT of SALE
4. Co-owners of an immovable, if they sold

their interests to the same person, may only
redeem their respective shares
a. Vendee cannot be compelled to agree to
a partial redemption
b. If the co-owners sold their interest to the
same person who previously bought the
share of a co-owner subject to a right of
redemption, then the latter may be
compelled to redeem the whole property
From whom to redeem
1. Vendee a retro
2. His heirs, assigns or agents
3. Subsequent purchaser of property, even if
the right to redeem was not mentioned in the
subsequent contract; except if registered
land, where the right to redeem must be
annotated in the title
4. If several heirs, then the right of redemption
can be exercised against each heir for his
share of the property
How exercised
1. Returning the ff. to the buyer: (PEN)
a. Price of the sale;
b. Expenses of the contract and other
legitimate payments made by reason of
the sale;
c. Necessary and useful expenses made
on the thing sold
2. Complying with any other stipulation agreed
upon, if any.
NOTE:
1. BPI Family Savings Bank, Inc. v. Veloso,
(2004): The general rule in redemption is
that it is not sufficient that a person offering
to redeem manifests his desire to do so. The
statement of intention must be accompanied
by an actual and simultaneous tender of
payment for the full amount of the
repurchase price.
2. Paez v. Magno, (1949):Tender of payment
is enough (i.e., consignation is not
necessary), if made on time, as a basis for
action against the buyer to compel him to
resell. But that tender does not in itself
relieve the buyer from his obligation to pay
the price when redemption is allowed by the
court.
Effect of redemption
1. The seller shall receive the thing free from
all charges or mortgages constituted by the
buyer BUT he shall respect leases executed
by the buyer in good faith and in accordance
with local custom.
2. If there are growing fruits at the time of sale
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and at the time of redemption: no

reimbursement or prorating if the buyer did
not pay indemnity at the time of sale
3. If there were no growing fruits at the time of
sale, but some exist at the time of
redemption: fruits prorated (buyer entitled to
part corresponding to time he possessed the
land in the last year, counted from the
anniversary of the date of sale)
Effect of non-redemption
Ownership is consolidated in the buyer BUT
the consolidation shall not be recorded in
the Registry of property w/o a judicial order,
after the vendor has been duly heard.
Right to Redeem vs. Option to Purchase
(Villanueva)
Right to Redeem
Not a separate contract
but part of a main
contract of sale, and
cannot
exist
unless
reserved at the time of
the perfection of the main
contract of sale
Does
not need its
separate consideration to
be valid and effective
Option to Purchase
Generally a principal
contract and may be
created independent of
another contract
The maximum period for

the exercise of the right
to repurchase cannot
exceed 10 years
Requires in addition a
tender of payment of the
amount required by law,
including
consignment
thereof if tender of
payment cannot be made
effectively on the buyer
The period of the option

contract may be beyond
the 10-year period
Must
have
a
consideration
separate
and distinct from the
purchase price to be valid
and effective (Arts. 1324
and 1479)
May be exercised by
notice of its exercise to
the offeror
III. Equitable Mortgage

(Asked in 79, 80, 82, 84, 86, 89, 91, 05)
Definition
Molina v. CA, (2003): An equitable mortgage is
defined as one which, although lacking in some
formality, or form or words, or other requisites
demanded by a statute, nevertheless reveals the
intention of the parties to charge real property
as security for a debt, and contains nothing
impossible or contrary to law.
Tan v. Valdehueza, (2003): The Valdehuezas
having remained in possession of the land and
the realty taxes having been paid by them, the

contracts which purported to be pacto de retro
transactions are presumed to be equitable
mortgages, whether registered or not, there
being no third parties involved.
Legaspi v. Spouses Ong, (2005): A pactum
commissorium is a stipulation enabling the
mortgagee to acquire ownership of the
mortgaged
properties
without
need
of
foreclosure proceedings which is a nullity being
contrary to the provisions of Article 2088 of the
Civil Code. The inclusion of such stipulation in
the deed shows the intention to mortgage rather
than to sell.
A pactum commissorium is contrary to the
nature of a true pacto de retro sale since
ownership of the property sold is immediately
transferred to the vendee a retro upon execution
of the sale, subject only to the repurchase of a
vendor a retro within the stipulated period.
Sale with right to

repurchase
Right to repurchase the
thing sold granted to
the
vendor
in
a
separate
instrument
from the deed of sale
Equitable mortgage
When any of the
cases in Art. 1602
arise
Presumption that a contract is an equitable

mortgage arises when (5P-R)
1. Price unusually inadequate;
2. Possession retained by the seller as lessee
or otherwise;
3. Period of redemption extended (or granted
anew) upon or after the expiration of the
right to repurchase;
4. Part of the purchase price retained by the
seller;
5. Payment of taxes on the thing sold borne by
the seller;
6. Any other case where it may be fairly
inferred that the Real intention of the parties
is for the transaction to secure a debt or
other obligation.
For the presumption of an equitable
mortgage to arise under Art. 1602, 2
requisites must concur (Molina v. CA,
2003)
1. That the parties entered into a contract
denominated as a contract of sale, and
2. That their intention was to secure an existing
debt by way of a mortgage.
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In case of doubt, a contract purporting to be a

sale with right to repurchase shall be construed
as an equitable mortgage (Art. 1603)
Rationale behind provision on equitable
mortgage
1. Circumvention of usury law
2. Circumvention of prohibition against pactum
commissorium creditor cannot appropriate
the things given by way of pledge or
mortgage since remedy here is foreclosure.
Remedies of apparent vendor
1. If the instrument does not reflect the true
agreement, the remedy is reformation
2. If decreed to be an equitable mortgage, then
any money, fruits or other benefit to be
received by the buyer as rent or otherwise
considered as interest.
3. If decreed as a true sale with right to
purchase- seller may redeem w/in 30 days
from finality of judgment, even if the period
for redemption has expired.
IV. Legal Redemption

Definition
Right to be subrogated:
a. upon the same terms and conditions
stipulated in the contract,
b. in the place of one who acquires a thing
by purchase or dation in payment, or by
any
other
transaction
whereby
ownership is transmitted by onerous title
(Art 1619, CC)
Applies to transfers of ownership by onerous

title where subrogation is possible. Hence, it
cannot apply to barter or to transfer by
gratuitous title or hereditary succession.
Applies to sales with pacto de retro
(BAVIERA citing MANRESA)
Manner
1. a formal offer to redeem or
2. filing of an action in court together with the
consignation of the redemption price within
the reglementary period
Period to Redeem
To whom granted
a. Co-owner (Art 1620)
b. Adjoining owner of
Rural
Land
(Article
1621)
c. Adjoining owner of
urban land (Art. 1622)
Debtor in case a
credit or
incorporeal right in
litigation is sold
(Art.1634)
Applicant or his widow
or legal heirs in case of
sale of homestead
(Sec.119, Public
Land Act)
Taxpayer in case of tax
sale (Sec. 215,
NIRC)
Judgment
debtor,
successorin- interest,
or
creditor
with
subsequent lien, in case
of execution sale
(Rule 39, Sec.27,
ROC)
Debtor-mortgagor,
successors-in- interest,
judicial/judgment
creditor, any person
having a lien on the
property, in case of
extrajudicial foreclosure
of mortgage (Act No.
3135. Sec. 6. )
Debtor-mortgagor
in
case
of
judicial
foreclosure
of
real
estate mortgage IF the
mortgagee is a bank or
a banking institution.
(The
General Banking
Law of 2000)
Period
30 days from notice
- In writing
- By the seller
- Of the actual execution
and delivery of the deed
of sale
Doromal v. CA: Actual
knowledge of the sale is
immaterial
Conejero v. CA: the law
did not provide for a
particular mode of written
notice,
thus
any
compliance with written
notice should suffice,
including the giving of a
copy of the deed of sale
30 days from the date the
assignee
demands
payment from debtor
5 yrs. from
conveyance
date
of
1 year from
forfeiture
date
of
1 year from the date of

registration
of
the
certificate of sale
1 year from the date of

the sale
90 days from finality of

judgment
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Agricultural lessee w/o

knowledge of sale of
landholding
(Agrarian Land
Reform Code,
Sec.12)

2
years
from
the
registration of the sale
Instances of Legal Redemption

1. Redemption by Co-owners (Art. 1621)
A co-owner of a thing may exercise the right
of redemption in case the shares of all the
co-owners or any of them are sold to a third
person
a. Third person refers to all persons who
are not heirs of the vendor, by will or
intestate succession
b. The right is available not only to original
co-owners, but to those who had later
acquired the share of the co-owner
c. But the right of redemption may be
exercised by a co-owner only when part
of the community property is sold to a
stranger. When the portion is sold to
another co-owner, the right does not
arise because a new participant is not
added to the co-ownership (Fernandez
v. Taun)
If the price of the alienation is grossly
excessive, the redemptioner shall pay only a
reasonable one
Should two or more co-owners desire to
exercise the right, they may also do so in
proportion to the share they may
respectively have in the thing owned in
common
Order of preference if two or more wish to

exercise the right:
a. Owner with smaller land area
b. If same land area, then the one who first
requested the redemption
Ortega v. Orcine, (1971): What constitutes
rural or urban is to be determined from
the character of the community or vicinity in
which it is found, and NOT from the nature
of the land itself nor the purpose to which it
is devoted
3. Redemption by adjoining land-owners of
urban land (applies only to small
portions of urban land) (Art. 1621)
Right of Pre-emption
Owner of any adjoining
land has a right of preemption at a reasonable
price when:
-Urban land is so small
and so situated that a
major portion of it cannot
be used for any practical
purpose
w/in
a
reasonable time;
-Was bought merely for
speculation;
-Was resold
Right of Redemption
If the resale has been
perfected, the owner of
the adjoining land shall
have
a
right
of
redemption, also at a
reasonable price
Arises before sale

No rescission because
no sale exists yet
The action is directed
against
prospective
seller
Arises after sale

There can be rescission
of the original sale
Action is directed against
buyer
Priority if 2 or more
adjoining owners want to
redeem: owner whose
intended use of the land
appears to be best
justified
4. Redemption of Credit
Rationale: Public Policy, since
ownership is a hindrance to
development and administration of
property (BAVIERA)
cothe
the
Available when it is sold while in litigation

(From the time the complaint is answered)
The ff. Requisites must concur:

a. A piece of rural land is alienated
b. Area does not exceed one hectare
NOT available when the assignment in favor

of:
a. Co-heir/co-owner of right assigned
b. Creditor in payment of his credit
c. Possessor of a tenement or piece of
land which is subject to the right
assigned
When not applicable:

a. The grantee does not own any rural land
b. Adjacent lands are separated by brooks,
drains, roads and other apparent
servitudes for
the benefit of other
estates
How exercised: reimburse the assignee for

the:
a. Price paid
b. Judicial expenses incurred
c. Interest on the price from date of
payment
2. Redemption by Adjoining Land-owners

of rural land (Art. 1621)
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5. Under the Public Land Act

Coverage:
a. Every conveyance of land acquired
under a free patent or homestead
b. The ownership of the land must have
been transferred to another. If the
transaction is a mere promise to sell,
there is no right yet to redeem
c. This refers to conveyances made after
the prohibited 5 years from the issuance
of the patent or grant
Period:
a. Within 5 years from the date of
conveyance
b. If pacto de retro sale, the period to
redeem cannot be less than 5 years
Who may redeem:
a. Gen Rule: Applicant, widow, or heirs
b. Exception: land is sold to another
member of the family of the applicant, or
his direct descendant or heir
c. From whom: Subsequent purchasers
6. Redemption
in
Execution Sales
Who may redeem
Period to redeem
Amount of redemption
Foreclosure
and
In
extra
judicial
foreclosure
-Debtor
-Successor in interest
-Judicial or judgment
creditor of said debtor
-Junior encumbrancer
In execution sales
-Judgment debtor
-Successor in interest
-Creditor having a lien
on the property sold by
attachment, judgment or
mortgage
on
the
property subsequent to
the judgment
Extra judicial foreclosure
- within 1 year from the
date of the sale
Execution sale
- within 12 months after
the sale
If land is mortgaged in
favor of a bank
- within 1 year after the
sale (not available in
case of a corporate
mortgagor)
-Amount of the purchase
-Interest at 1% per
month from the time of
the sale up to the time of

redemption
-Any assessment or
taxes
which
the
purchaser may have
paid
7. Under the Agrarian Land Reform Code

Lessees right of pre-emption
a. The agricultural lessee shall have the
preferential right to buy under the same
reasonable terms and conditions, in
case the lessor decides to hold the
landholding
b. Conditions:
The landholding must be preempted by the DAR
When two or more lessees, each
shall have preferential right only to
the extent of the area cultivated by
him
c. Period: 180 days from notice in writing
Lessees right of redemption
a. Sec. 12 RA 3844: In case landholding is
rd
sold to 3 person without the knowledge
of the lessee, the latter shall have the
right to redeem the same at a
reasonable price and consideration
b. Period: within 180 days from notice in
writing
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Chapter VIII. Philippine Bulk Sales Law

(Act 3952)
I.
II.
III.
IV.
PURPOSE
COVERAGE
DUTY OF SELLER
EFFECT OF NON-COMPLIANCE
I.
Purpose
Purpose (Villanueva)
To compel the seller in bulk to execute
and deliver a verified list of his creditors
to his buyer, and notice of intended sale
to be sent in advance to said creditors
and to use the proceeds to cover
payment of outstanding liabilities
To protect creditor of merchant stores
The Law is constitutional as a valid exercise of
police power of the State. (Liwanag v.
Menghraj, (1941))
II. Coverage
The Law covers all transactions, whether done
in good faith or not, that fall within the
description of what is bulk sale (Villanueva)
Transactions Covered
Applies to sales and transfers in bulk,
including any sale, transfer, mortgage or
assignment of:
1. A stock of goods, wares, merchandise,
provisions or materials NOT in the ordinary
course of trade and the regular prosecution
of the business of the seller, transferor,
mortgagor, or assignor
2. All, or substantially all, of the business or
trade theretofore conducted by the seller,
transferor, mortgagor, or assignor
3. All, or substantially all, of the fixtures and
equipment used in and about the business
of the seller, transferor, mortgagor, or
assignor
When not applicable
1. Written waiver by vendor, transferor,
mortgagor or assignor, as shown by verified
statements
2. To executors, administrators, receivers,
assignees in insolvency, or public officers,
acting under judicial process.
Chapter VIII. PHILIPPINE BULK SALES LAW
III. Duty of Seller

1. Sworn statement of list of creditors
Contents:
o Names + addresses of all
creditors
o Amount of indebtedness due or
owing
When delivered: Before any part of
the purchase price is received, or
any promissory note or evidence of
indebtedness therefor
Delivered to:
o Buyer, mortgagee or agent
o If corporation: president, vicepresident, treasurer or secretary
o If partnership firm: a member
thereof
2. Pro-rata application of the purchase or
mortgage money to the payment of
listed creditors
3. Inventory of the goods, wares,
merchandise, provisions or materials
When made: at least 10 days before
sale or mortgage
Contents:
Quantity
Cost price of each article (as far as
possible)
4. Notice to listed creditors
When made: at least 10 days before
transfer of possession
How: personally or by registered
mail
Contents:
Price,
terms
and
conditions
of
sale,
transfer,
mortgage or assignment
5. Consideration for the sale, transfer,
mortgage or assignment
Must not be nominal
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Chapter VIII. PHILIPPINE BULK SALES LAW
IV. Effect of non-compliance

On Transaction Itself
If the purchase or mortgage money is not
applied pro-rata to the bona fide claims of listed
creditors: Sale, transfer or mortgage shall be
FRAUDULENT and VOID.
Mortgagor,
Violation
Failure to comply with
the
obligation
to
prepare and deliver the
sworn statement listing
his creditors and the
application pro-rata of
the proceeds to the
creditors. (Sec 4)
Transferor
or
Sanction
criminal liability
Section 7: Transfer by any
person, firm or corporation
as owner of any stock of
goods,
wares,
merchandise, provisions
or materials, in bulk of
title to the same without
consideration or for a
nominal
consideration
only, subjects him to
criminal liability
On Buyer, Mortgagee, Transferee or

Assignee
The Law imposes no direct obligation, thus a
buyer in bulk sale cannot be deemed to be
subject to the criminal liability under the Law
[NOTE: Criminal liability: 6 months to 5 years
imprisonment, or fine of P5K or less, or both.]
- end of Sales -
304
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On
Seller,
Assignor

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CIVIL LAW REVIEWER

Chapter IV. Risk of Loss..............................288

Chapter III. Double Sales .............................286

Prof. Roberto N. Dio

Jaim Mari M. Crisostomo

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Chapter I. The Contract of Sale

DESIGN & LAYOUT

Definition (Art 1458, CC)

Contract where one of the parties (Seller)

Transfer ownership of and

to deliver a determinate thing;

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and the other (Buyer) to pay a price certain in

Chapter I. The CONTRACT of SALE

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Chapter I. The CONTRACT of SALE

Rationale: Guardianship is a trust of the

All persons who have capacity to enter into

General Rule: Cannot sell property to

Exception: if acquisition is through

d. Public Officers and Employees

b. Alienage (Art. 39, CC)

Executors and Administrators

Trusteeship (Art. 39)

3. Specific Incapacity (Art. 1491, CC) (AGEPLJ)

Justices, Judges, prosecuting attorneys,

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the provisions of law governing the form of

Form and Offer

MUST NOT BE VITIATED

OFFER AND ACCEPTANCE

If only 1 party is incapacitated:

Chapter I. The CONTRACT of SALE

Chapter I. The CONTRACT of SALE

MUST BE LICIT (ART. 1459)

Sale of VAIN hope or

come into existence: the price even if the

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5. Quantity of Subject Matter not determinate

2. But if thing or part thereof has been

IN MONEY OR ITS EQUIVALENT

Example of equivalent: Letters of credit

4. Things Subject to Resolutory Condition

Chapter I. The CONTRACT of SALE

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Chapter I. The CONTRACT of SALE

agreed period, at a fixed price. (De

b. Difference from Sale:

2. Option Contract (Asked in 75, 77, 80, 93,

Right of first refusal (Asked in 93, 96,

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must have been actually or

Difference from sale:

Option Money vs. Earnest Money (Limson vs.

Buyer manifests his

Distinction from Option Contract

No right to buy or sell, only a

Begins when the parties perform their respective

IV. Kinds of Sale